Danisco announces ingredients shake-up

Changes to Danisco's ingredients division will lift the EBIT margin for the segment to above 15 per cent, according to the firm's announcement of Q1 2006/07 results.

The group said that extensive streamlining of the organisation and management structure, along with moving innovation activities to the product divisions and sales, will have a positive impact on the rest of the year's performance.

"The ambition is to strengthen efficiency and competitiveness, chiefly through a reorganisation towards larger units centred round product groups and technologies," said the company in a statement.

"This will allow for intra-group synergies in the value chains and a less complex organisation and management structure."

The main organisational changes in ingredients are the consolidation from nine to four product divisions, the consolidation of R&D into the four product divisions and the strengthening of the global sales organisation for food ingredients by integrating application activities. The four divisions are Genencor, Cultures, Texturants & Sweeteners and Flavours.

The Genencor and Cultures divisions will be joined in one operational unit called Bio Ingredients. Together, these two divisions generated revenue of around DKK 5.1 billion in 2005/06, equivalent to 38 per cent of revenue in ingredients.

"Bio Ingredients will have global production facilities and a staff totalling some 2,250 people," said Danisco.

"It will be the most R&D-intensive product area in ingredients. Danisco has a leading global market position in all primary product segments under this division."

Texturants & Sweeteners on the other hand will comprise the product areas emulsifiers, textural ingredients, functional systems and sweeteners (mainly natural sweeteners) as well as a number of minor industrial products. In 2005/06 the division recorded revenue of around DKK 6.7 billion, equivalent to 50 per cent of revenue in ingredients.

The division employs around 3,100 people.

Finally, Flavours comprises this one product area and recorded revenue of around DKK 1.5 billion in 2005/06, equivalent to 12 per cent of revenue in ingredients. The division employs around 700 people and is headquartered in Brussels, Belgium.

The new organisational structure will take effect on 1 November 2006.

Overall, Danisco said that revenue, profit and cash flow in Q1 2006/07 (1 May to 31 July 2006) were in line with expectations, and that the full-year outlook for 2006/07 is maintained.

Revenue grew 2 per cent to DKK 5,283 million for Q1, driven by 6 per cent organic growth in ingredients, while the firm's sugar division recorded a slight decline in revenue.

EBIT (Earnings before interest and taxes) before special items and share-based payments rose 6 per cent to DKK 648 million, resulting in an EBIT margin of 12.3 per cent.

Special items amounted to a net expense of DKK 16 million, primarily relating to the integration of Genencor.

Danisco said that the outlook for 2006/07 is unchanged compared with the expectations stated in the announcement of results for 2005/06. Revenue is expected at around DKK 21.0 billion with DKK 13.5 billion in Ingredients and DKK 7.5 billion in Sugar.

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